Press Release

American Equity Reports Third Quarter 2013 Results

WEST DES MOINES, Iowa--(BUSINESS WIRE)--Nov. 4, 2013--
American Equity Investment Life Holding Company (NYSE: AEL), a leading
underwriter of index and fixed rate annuities, today reported third
quarter 2013 net income of $56.2 million, or $0.75 per diluted common
share, compared to a third quarter 2012 net loss of $7.8 million, or
$0.13 per diluted common share.

Non-GAAP operating income1 for the third quarter of 2013 was
$59.8 million, or $0.80 per diluted common share, compared to third
quarter 2012 non-GAAP operating income1 of $22.2 million, or
$0.34 per diluted common share.

Third quarter 2013 net income and non-GAAP operating income1
were increased by $20.2 million ($0.27 per diluted common share) and
$22.4 million ($0.30 per diluted common share), respectively, for
revisions to assumptions utilized in the determination of deferred
policy acquisition costs, deferred sales inducements and the liability
for future benefits to be paid under lifetime income benefit riders. Net
loss and non-GAAP operating income1 for the third quarter of
2012 were impacted by similar assumption revisions which increased the
net loss by $0.8 million ($0.01 per diluted common share) and reduced
non-GAAP operating income1 by $4.9 million ($0.07 per diluted
common share).

The diluted share count for third quarter 2013 was 74.6 million shares
compared to 65.3 million shares for the third quarter of 2012. This
increase was attributable to greater dilution from convertible notes,
warrants and stock options because the Company’s common stock price was
substantially higher in the third quarter of 2013 compared to the third
quarter of 2012.

1 In addition to net income, we have consistently utilized
operating income and operating income per common share – assuming
dilution, non-GAAP financial measures commonly used in the life
insurance industry, as economic measures to evaluate our financial
performance. See accompanying tables for reconciliations of net income
to operating income and descriptions of reconciling items. See Company’s
Quarterly Report on Form 10-Q for a more complete discussion of the
reconciling items and their impact on net income for the periods
presented. Because these items fluctuate from period to period in a
manner unrelated to core operations, we believe measures excluding their
impact are useful in analyzing operating trends. We believe the combined
presentation and evaluation of operating income together with net
income, provides information that may enhance an investor’s
understanding of our underlying results and profitability.

Investment spread was 2.80% compared to 2.70% and 2.68% for the second
and first quarters of 2013, respectively.

Estimated risk-based capital (RBC) ratio at September 30, 2013
remained above target at 333% compared to 324% at June 30, 2013 and
332% at December 31, 2012.

Book value per share (excluding accumulated other comprehensive
income) increased to $18.81 at September 30, 2013 compared to $18.66
at June 30, 2013 and $16.49 at December 31, 2012.

SPREAD IMPROVES AS EXCESS CASH AND SHORT-TERM INVESTMENTS DEPLOYEDAmerican
Equity’s investment spread for the third quarter of 2013 increased to
2.80% compared to 2.70% for the second quarter of 2013 and 2.62% for the
third quarter of 2012. The average yield on invested assets including
the excess cash and short-term investments balances was 5.02% for the
third quarter of 2013 compared 4.94% for the second quarter of 2013 and
5.17% in the third quarter of 2012. The increase in investment spread
for the quarter also included a reduction in the aggregate cost of money
for annuity liabilities to 2.22% in the third quarter of 2013 compared
to 2.24% in the second quarter of 2013 and 2.55% in the third quarter of
2012. The reductions in the cost of money reflect adjustments to new
money and renewal crediting rates to policyholders.

The increase in investment yield for the quarter was primarily due to
the elimination of American Equity’s excess cash and short-term
investments. At September 30, 2013, the Company did not hold any excess
cash and short-term investments compared to $816 million at June 30,
2013 and $2.2 billion at December 31, 2012. The average balance for
excess cash and short-term investments was reduced to $341 million in
the third quarter of 2013 from $1.7 billion in the second quarter of
2013 and $2.0 billion in the third quarter of 2012.

Although investment yield for the quarter increased due to the
deployment of excess cash and short-term investments, new premiums and
cash flows from the investment portfolio continued to be invested at
rates below the portfolio rate. However, with the general movement in
interest rates being up, new investments in the third quarter were made
at yields that were better than those available earlier in the year. The
average yield on fixed income securities purchased and commercial
mortgage loans funded in the third quarter of 2013 was 4.37% compared to
an average yield of 3.49% and 3.48% in the first two quarters of 2013.

Commenting on investment spread, John M. Matovina, Chief Executive
Officer and President said: “We met our expectation of eliminating our
excess cash and short-term investments balance and achieving a fully
invested position during the third quarter of 2013. At current rates and
market conditions, our call exposure for the future periods is
realistically limited to $500 million of agency bonds maturing in
January 2028 with 3.75% coupons. These securities are callable quarterly
and a modest decline in interest rates from current levels could result
in the calls being exercised on their next call dates in January 2014.”

Matovina continued, “Even as the income side of our spread measurement
stabilizes, we maintain the flexibility to reduce our cost of money
through adjustments to fixed crediting rates, caps and participation
rates. We can reduce our cost of money by 60 bps before being limited by
minimum guaranteed rates. We expect further declines in our cost of
money from rate adjustments already implemented and will be making
further renewal rate adjustments in 2013 and 2014. These actions should
enable us to achieve our goal of restoring our investment spread to the
3.00% target by the end of 2014.”

LIABILITY MANAGEMENTOn July 17, 2013, the Company issued
$400 million aggregate principal amount of its 6.625% Senior Notes due
2021 (the “Notes”). The Company used $15 million of the net proceeds
from the Notes issuance to repay the entire amount outstanding under the
Company’s revolving credit facility and, in October 2013, used $128
million of the net proceeds from the Notes issuance to pay the cash
consideration to holders of two issues of the Company’s convertible
notes who accepted the Company’s exchange offers to retire those notes.
The aggregate principal amount of convertible notes retired through the
exchange offers was $102 million and the consideration paid to the
exchanging note holders also included 3,118,780 shares of the Company’s
common stock. Please refer to the Company’s September 30, 2013 Financial
Supplement for certain September 30, 2013 pro forma information for the
impact of the exchange offers.

The Company intends to use the remaining net proceeds from the Notes
issuance to tender for, redeem or repurchase the $214 million aggregate
principal amount of convertible notes that are currently outstanding.
The form and timing of any such activity will be dependent upon market
conditions and other factors and there can be no assurance that any such
transactions can be completed prior to the December 2014 call date for
the 5.25% convertible notes or the September 2015 maturity date for the
3.50% convertible notes.

OUTLOOK REMAINS POSITIVECommenting on results and the
outlook for American Equity, David J. Noble, founder and Executive
Chairman said: “Third quarter 2013 financial results were very
satisfactory. Assets under management grew 3% from last quarter which
includes sales of more than $1 billion. Our operating income1
per share, exclusive of the impact from unlocking but inclusive of the
increase in diluted share count, grew almost 22% year over year. And
importantly, we eliminated our excess cash and short-term investments
during the quarter which helped boost our investment spread to 2.80%.”

Noble continued: “Our assets under management are up 14% in the last
twelve months and we are optimistic our sales momentum from the last two
quarters will carry through the balance of the year and into 2014. We
continue to deliver growth in assets under management while
conservatively managing our risks and financial profile, sustaining a
double-digit operating return on average equity, and maintaining a
cushion to our targeted RBC ratio. American Equity is well positioned to
capitalize on the growing demand for guaranteed retirement savings and
income products and expect our invested assets and earnings to continue
to grow in the periods ahead.”

CAUTION REGARDING FORWARD-LOOKING STATEMENTSThis press
release contains forward-looking statements within the meaning of The
Private Securities Litigation Reform Act of 1995. Forward-looking
statements relate to future operations, strategies, financial results or
other developments, and are subject to assumptions, risks and
uncertainties. Statements such as “guidance”, “expect”, “anticipate”,
“believe”, “goal”, “objective”, “target”, “may”, “should”, “estimate”,
“projects” or similar words as well as specific projections of future
results qualify as forward-looking statements. Factors that may cause
our actual results to differ materially from those contemplated by these
forward looking statements can be found in the company’s Form 10-K filed
with the Securities and Exchange Commission. Forward-looking statements
speak only as of the date the statement was made and the company
undertakes no obligation to update such forward-looking statements.
There can be no assurance that other factors not currently anticipated
by the company will not materially and adversely affect our results of
operations. Investors are cautioned not to place undue reliance on any
forward-looking statements made by us or on our behalf.

CONFERENCE CALLAmerican Equity will hold a conference call
to discuss third quarter 2013 earnings on Tuesday, November 5, 2013, at
9:00 a.m. CST. The conference call will be webcast live on the Internet.
Investors and interested parties who wish to listen to the call on the
Internet may do so at www.american-equity.com.

The call may also be accessed by telephone at 877-703-6108, passcode
49119781 (international callers, please dial 857-244-7307). An audio
replay will be available shortly after the call on AEL’s website. An
audio replay will also be available via telephone through November 26,
2013 at 1-888-286-8010, passcode 74630244 (international callers will
need to dial 617-801-6888).

ABOUT AMERICAN EQUITYAmerican Equity Investment Life
Holding Company, through its wholly-owned operating subsidiaries, is a
full service underwriter of fixed annuity and life insurance products,
with a primary emphasis on the sale of index and fixed rate annuities.
American Equity Investment Life Holding Company, a New York Stock
Exchange Listed company (NYSE: AEL), is headquartered in West Des
Moines, Iowa. For more information, please visit www.american-equity.com.

In addition to net income (loss), we have consistently utilized
operating income and operating income per common share - assuming
dilution, non-GAAP financial measures commonly used in the life
insurance industry, as economic measures to evaluate our financial
performance. Operating income equals net income (loss) adjusted to
eliminate the impact of net realized gains and losses on investments
including net OTTI losses recognized in operations, fair value changes
in derivatives and embedded derivatives, loss on extinguishment of debt
and changes in litigation reserves. Because these items fluctuate from
quarter to quarter in a manner unrelated to core operations, we believe
measures excluding their impact are useful in analyzing operating
trends. We believe the combined presentation and evaluation of operating
income together with net income (loss) provides information that may
enhance an investor’s understanding of our underlying results and
profitability.

Reconciliation from Net Income (Loss) to
Operating Income (Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2013

2012

2013

2012

(Dollars in thousands, except per share data)

Net income (loss)

$

56,181

$

(7,829

)

$

202,325

$

21,401

Adjustments to arrive at operating income:

Net realized investment (gains) losses, including OTTI (a)

890

1,415

(5,488

)

5,823

Change in fair value of derivatives and embedded derivatives (a)

2,229

19,000

(72,187

)

42,478

Litigation reserve (a)

—

9,580

(1,969

)

9,580

Extinguishment of debt (a)

548

—

893

—

Operating income (a non-GAAP financial measure)

$

59,848

$

22,166

$

123,574

$

79,282

Per common share - assuming dilution:

Net income (loss)

$

0.75

$

(0.13

)

$

2.79

$

0.34

Adjustments to arrive at operating income:

Anti-dilutive effect of net loss

—

0.01

—

—

Net realized investment (gains) losses, including OTTI

0.01

0.02

(0.07

)

0.08

Changes in fair value of derivatives and embedded derivatives

0.03

0.29

(0.99

)

0.65

Litigation reserve

—

0.15

(0.03

)

0.15

Extinguishment of debt

0.01

—

0.01

—

Operating income (a non-GAAP financial measure)

$

0.80

$

0.34

$

1.71

$

1.22

(a) Adjustments to net income (loss) to arrive at operating income are
presented net of related adjustments to amortization of deferred sales
inducements (DSI) and deferred policy acquisition costs (DAC) and net of
income taxes.

American Equity Investment Life Holding Company

NON-GAAP FINANCIAL MEASURES

Average Stockholders' Equity and Return on
Average Equity

Return on equity measures how efficiently we generate profits from the
resources provided by our net assets. Return on equity is calculated by
dividing net income and operating income for the trailing twelve months
by average equity excluding average accumulated other comprehensive
income ("AOCI").

Twelve Months Ended

September 30, 2013

(Dollars in thousands)

Average Stockholders' Equity 1

Average equity including average AOCI

$

1,554,811

Average AOCI

(437,956

)

Average equity excluding average AOCI

$

1,116,855

Net income

$

238,723

Operating income

154,479

Return on Average Equity Excluding Average AOCI

Net income

21.37

%

Operating income

13.83

%

1 - simple average based on stockholders' equity at beginning and end of
the twelve month period.